Network Ties in Using Electronic Trading Systems in Fixed-income Markets

What is it about?

In Fixed-income (FI) institutions, people have different relationships in order to doing trades and making profits. The problem here is that how these relationships (i.e., flow of information) affect the use of information technology efficiently in the FI firms. Based on an empirical study in the FI environment this stud provides a unique insight into the social capital based on social networks of interpersonal relationships in the fixed-income market.

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Why is it important?

Information systems can serve as intermediaries between the buyers and the sellers in a market, creating an “electronic marketplace” that lowers the buyers’ cost to acquire information about sellers’ prices and product offerings. Although electronic trading systems provide potential to create an efficient market structure, we witness that a $45 trillion fixed-income market still makes little use of these systems. Low penetration of electronic trading systems in the marketplace is at odds with the existing information technology research doctrine. The reason is that the creation of efficient market structure through an electronic marketplace is based on macro-level interfirm relationships that do not take into account the recurrent micro-level, interpersonal interaction among the market actors.

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